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The Lost Decade of Wage Growth for Women

by Heidi Hartmann

Twice a year, the Institute for Women’s Policy Research (IWPR) updates its fact sheet, “The Gender Wage Gap,” to report the latest data as they become available from the Bureau of Labor Statistics and the Census Bureau. This year, we noticed something new when we added the latest figure for median weekly earnings for men and women who work full-time—a virtual standstill in women’s real wages for the past ten years. This was true when looking at trends in both usual weekly earnings and annual earnings for those who work full-time, year-round.

For several decades, as new Fed chair Janet Yellen notes, women have been the success story in the economy. Women increasingly pursued higher education, eventually surpassing men in college graduation rates. Women also joined the labor force in larger numbers, worked more throughout their lives, and entered a variety of occupations that had been formerly virtually closed to them, becoming bus drivers, mail carriers, fire fighters, police officers, bankers, lawyers, doctors, and many others.

These gains in education and work experience (what economists call human capital) contributed to narrowing the wage gap, and the equal opportunity legislation of the 1960s and 1970s helped too. The gender wage gap closed from 40 percent in 1960 to 23 percent in 2012 (in terms of annual earnings). Women’s real earnings—meaning wages adjusted for inflation—grew as well, from $22,418 in 1960 to $28,496 in 1970, $30,136 in 1980, $34,247 in 1990, $37,146 in 2000, and $38,345 in 2012.

In contrast, men’s real earnings have not grown since about 1975, although men’s real earnings have remained higher than women’s. In that year, men’s earnings were $50,093 (in 2013 dollars) and in 2012, they were $50,122. In other words, men have had nearly four decades of stagnant wages. Explanations for this are many, but the most persuasive in my view is that, for a variety of reasons stemming from institutional and policy changes, the productivity gains that the U.S. economy has enjoyed have simply not been passed on to workers (except those at the very top). Ordinarily, we economists expect workers’ wages to grow along with GDP growth and productivity growth (more output per hour worked). In the modern economy, men’s real wages have simply failed to thrive.

Women’s real earnings, however, did grow, until about 2002 when they too caught “real wages failure to thrive” disease. What caused this stagnation for women? Economists Francine Blau and Lawrence Kahn from Cornell University have described women’s success in the labor market as “swimming upstream.” Women were able, for several decades, to overcome the forces that have been generating increased economic inequality in America. By increasing their human capital and gaining access to new, better paid occupations, firms, and industries, women were able to achieve a significant degree of equality with men, despite trends pushing the top and the bottom further apart.

Now it seems as if the current is finally overpowering women, making it increasingly difficult for them to swim upstream. This is not to say that discrimination is any worse than it has been in the past, but progress in reducing discrimination is no longer being made. As IWPR’s fact sheet shows, women’s annual earnings in 2012 are slightly less than they were in 2001, at $38,438. Women’s weekly earnings at $706 in 2013 are about the same as they were in 2004, at $707.

What is to be done? I believe only a major policy shift, similar to what occurred in the 1960s and 1970s, with the Equal Pay Act (1963), the Civil Rights Act (1964), and Title IX (1972), will be able to get women’s wages back on track. The changes needed fall into four areas: 1) better enforcement of existing equal employment opportunity (EEO) laws and new legislation to fill the gaps in current law; 2) policies that help bring up the bottom of the labor market, which can jump start real wage growth; 3) policies that address the family needs of workers; and 4) policies that address the power of women.

Starting with the last first, encouraging collective bargaining for workers, encouraging women to take leadership positions in labor unions, encouraging women to run for public office (public funding for elections would help!), and ensuring that more women serve on corporate boards of directors would all increase women’s power. Policies that address such work-family issues as child care and paid family leave are sorely lacking in the United States, compared with other wealthy nations, and it’s high time we caught up—these policies are likely to increase women’s wages in the long run as they help equalize caregiving between women and men and lead women to invest more in their careers. Policies that especially bring up the bottom of the labor market have also fallen behind their historic norms: the minimum wage in real dollars is below where it was in the 1960s. The current proposal to increase the minimum wage to $10.10 per hour and raise the minimum wage for tipped workers to $4.90 per hour (it has been stuck at $2.13 per hour since 1991) is estimated by the White House to narrow the gender wage gap by more than one percentage point. The Obama Administration is also working on increasing the likelihood that those supervisory workers who earn modest salaries (for example, less than $50,000 per year, 54 percent of whom are women) will be paid time and a half for their hours worked beyond 40 per week. Stronger enforcement of the EEO laws we have goes without saying, so that women continue to be able to enter jobs that are currently done mostly by men (men’s jobs). We could also strengthen the law by making it illegal for employers to retaliate against workers who share pay information and requiring employers to pay comparable men’s and women’s jobs equally.

Heidi Hartmann, PhD, is founder and president of the Institute for Women’s Policy Research.